Funding Circle to no longer allow investors choose loans individually

Last post: Aug 22, 2017

Funding Circle have announced from Sept 18th investors will no longer be able to select what loans they invest in and must instead cede this decision to an AutoBid system

In quite possibly the biggest announcement in the history of
Peer to Peer Lending, Funding Circle – by far the largest provider of
selectable loans – have broken the news that they are going to remove the
facility for investors to bid manually from 18th September onwards.

From that date investors' funds will be distributed solely
via an "improved" AutoBid system. These improvements will actually result in a
tool which is less configurable than the current facility which allows funds to
be distributed across any combination of the site's 6 risk bands.

The new Autobid will only have 2 options. Conservative
(which invests in A+ and A rated loans) and Balanced (which distributes funds
across all the platform's offerings). These will offer projected returns of 4.8%
pa and 7.5% pa respectively. Presumably these figures are based on the revised
interest rates for each risk band which were also announced today.

These options seem remarkably similar to Zopa's two accounts
although the returns of 3.9% and 6.1% over at the fellow market leader, which
specializes in lending to individuals rather than SMEs, are significantly
lower.

Clearly, Funding Circle are chasing volume in the shape of
"casual" investors rather than the hard-core enthusiasts who have been
supported the P2P concept from the outset and wish to take a hands-on approach
to managing their portfolio. The site may be paving the way for their IFISA.

The Secondary Market will also undergo a similar dumbing
down. In future, investors will only be able to choose the amount they wish to
withdraw, they won't be able to select the loan parts that will be sold. This
will be done at random.

My initial reaction was to withdraw my funds from the
platform as I am uncomfortable about not having control over who my funds are
lent to and do not wish to invest in unsecured loans with less than double
digit returns which I have no way of avoiding in the brave new world.

I was considering switching my entire £21k holding over to
Assetz Capital where loans often have multiple items of security and there is a
Provision Fund but the drawback with AC is a lack of throughput restricting
diversification.

Dividing such a large sum across many loans to spread the
risk is going to take time therefore I have decided not to switch AutoBid on
when 18th September arrives, instead I will allow funds to accrue in
my Funding Circle account as my current self-selected portfolio of loans are
repaid and move them across to other platforms.

From an investor's point of view, this seems to provide
rival sites that do offer selectable loans, such as Lending Crowd, with a great opportunity however with no bidding taking
place over at Funding Circle, loans are sure to fill even faster to the joy of
borrowers. Will this mean the lenders FC reject are the only ones that appear
on other platforms? …I may even consider moving away from P2P.

These are indeed changing times… as the P2P industry grows
to become more mainstream perhaps it was inevitable that it would change to
resemble the banking world. For those who want greater control over how their
money is used, this is not necessarily a good thing.

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